December 27, 2024
This week, aluminum rod processing fees across China remained stable. As the off-season sentiment began to emerge downstream, the supply side saw a slight decline in operating capacity due to shipment pressure, but overall supply remained sufficient. On the demand side, downstream aluminum wire and cable enterprises experienced eased shipment pressure. These enterprises conducted production cuts and maintenance to prepare for the coming year, leading to weak demand for aluminum rod procurement. As of Thursday, the SMM A00 spot price stood at 19,820 yuan/mt, up 140 yuan/mt from last Thursday. The ex-factory average processing fee for 1A60 ordinary aluminum rod in Shandong was 400 yuan/mt; in Henan, it was 450 yuan/mt; in Inner Mongolia, it was 300 yuan/mt. The average delivery-to-factory processing fee for ordinary rods in south China was 550 yuan/mt, while in Hebei and Jiangsu, the average delivery-to-factory processing fee for 1A60 aluminum rods was 450 yuan/mt and 550 yuan/mt, respectively.
Regarding aluminum rods, despite the year-end period and the gradual transition to the off-season for downstream consumption, the supply side maintained high operating capacity due to pressure from liquid aluminum consumption. Northern enterprises generally implemented minor production cuts, while aluminum rod enterprises in south China maintained stable operations, leading to a slight tightening in aluminum rod supply. According to the SMM survey, aluminum rod manufacturers reported that although January-February is typically the off-season for consumption, there might be concentrated stockpiling demand before the holiday. Considering that aluminum rod processing fees are slightly more advantageous than aluminum billet, manufacturers may adopt a strategy of reducing aluminum billet production and increasing finished product inventories of aluminum rods.
On the demand side, the current operating rate of aluminum wire and cable enterprises showed initial weakness, trending downward. These enterprises reported that most orders had been fulfilled, with current production mainly focused on scattered orders. Post-holiday deliveries are not urgent, and both raw material and finished product inventories are at relatively low levels, resulting in moderate demand for aluminum rods and weak purchasing sentiment. Meanwhile, traders aimed to reduce inventories and prioritize shipments to recover funds by year-end, further reflecting subdued buying sentiment.
Overall, while the supply side experienced a slight pullback, it remained relatively loose. The demand side is expected to see a significant decline, further exacerbating the market's supply-demand imbalance. Aluminum rod processing fees are anticipated to fluctuate downward.
This week, the operating rate of leading domestic aluminum wire enterprises recorded 68%, down 3.8% WoW. As December entered its mid-to-late period, cold weather in the north delayed power grid construction, weakening shipments in the aluminum wire and cable industry. Coupled with year-end payment collection pressures, these dual factors led to a decline in operating rates for aluminum wire and cable enterprises. Although the State Grid's urgent delivery orders have temporarily concluded, demand in the aluminum enamelled wire sector in south China remained robust, showing a "rush for exports" trend. Current operations in this segment were resilient, making it one of the better-performing sub-sectors. SMM expects that with the upcoming Spring Festival, northern aluminum wire and cable manufacturers may take the lead in production cuts and holidays due to distant delivery deadlines for pending orders. In contrast, power grid construction in south China may remain unaffected, and urgent orders from the home appliance sector could sustain stable operations. Despite significant regional differences, the year-end off-season is expected to lead to a decline in demand, with the aluminum wire and cable industry's operating rate likely to fluctuate downward.
On the supply side, aluminum rod manufacturers' operating capacity remained stable overall, with only a few manufacturers experiencing slight production declines due to liquid aluminum issues. Overall, aluminum rod supply in November was mainly stable or slightly increased. Specific data will be further surveyed and reported by SMM. On the demand side, as the year-end approached, ultra-high voltage-related orders were mostly delivered by the end of October, followed by tightening pick-up of provincial grid distribution network orders. Enterprises rushed to meet year-end delivery deadlines, and with low raw material inventory levels, demand for 1-series electrical round aluminum rods increased. Some markets saw concentrated purchasing, slightly improving the supply-demand pattern for aluminum rods. Aluminum rod processing fees initially showed signs of standing firm on quotes, with short-term upward potential. However, as the year-end approaches and terminal pick-up slows, downstream enterprises shift their focus to payment collection, and operating rates may face a turning point. Demand is expected to weaken gradually in mid-to-late December, while supply-side changes remain limited. By then, aluminum rod processing fees may face downward pressure.
